This invention relates to inventory systems and specifically to planning and deploying inventory systems for service parts used to service and repair equipment.
Many companies regard post-sale servicing of their products as little more than a distraction. From this perspective, service is only an expense. However, analysis shows that post-sales service can be a significant revenue generator when properly planned and managed. For example, in the highly competitive jet engine business, manufacturers have realized that the value of servicing a product over its life can exceed the original sales price by as much as five times.
The tasks faced by post-sales business groups vary greatly by industry and by customer type. Personal computer manufacturers may have a large client base but only a relatively small number of parts to keep on hand to service perhaps 30 models of PCs. In contrast, manufacturers of construction or land moving equipment may have a smaller client base but may need to service such a wide range of complicated machinery that perhaps 500,000 replacement service parts need to be available to the repair technicians. Tracking and planning for the half million parts is a very challenging task.
Unfortunately, those managing the inventory may not be well qualified. For example, certain OEMs allow their dealers to control part inventories. The planners at these dealerships may treat all parts equally, applying the same forecasting, stocking, lot sizing and reviewing policies—regardless of the demand, supply and profit characteristics of the individual parts. For example, planners may make no distinction between an item with a high-volume demand, stable order patterns and quick replenishment lead times, and another item that rarely fails in the field, is sourced from one supplier and has a six-month lead time. As a result, these dealers may keep excess inventory aging on shelves while lacking the specific parts needed by their service technicians.
In an attempt at a solution, some post-sales business units have implemented software to help their inventory management needs. However, current transactional and advanced planning software fails to identify and integrate the detailed root causes of inventory performance. For example, demand for service parts typically exhibits random, or stochastic demand patterns; this uncertainty must be included in developing deployment and replenishment strategies. Also, enterprise resource planning systems currently available may help OEMs to meet only 40%-60% of their high-volume post-sales needs. This leaves a 60%-40% gap that has been difficult to fix.
What is needed is a way to close the gap between the inventory of service parts and the need for the parts. What is needed is a method to prioritize the management of a parts inventory to optimize the process, thereby having the proper mix of inventory to meet agreed upon service levels without overstocking on inventory. What is also needed is a way to perform such management without requiring planners to have an advanced degree in statistics or operations research. What is needed is a methodology that is cost-effective as well as scientifically based rather than only being based on rules of thumb or ‘guestimates’. What is needed is a way to determine the drivers of inventory levels for service parts and to control these drivers. In addition, what is needed is a systematic and easy-to-understand methodology and toolset for that will allow the average user to conduct advanced optimization techniques on their service parts inventories.
There are several other factors and issues typically associated with managing service parts inventories. First, supplier performance for service parts is typically very poor; replenishment lead times typically range from 6-18 months, and line fill rates typically are less than 50%. Next, service parts distribution networks are typically fragmented with lots of individual locations: central depots, field depots, customer depots, and mobile stock. The large number of forward deployed inventories makes inventory visibility difficult, thereby making it very difficult to develop and implement stable deployment and replenishment strategies. Next, many service parts are also considered repairables, which are parts that can be fixed when they fail, instead of disposed. Repair operations require reverse flows (from customer to repair depots), forecasting of repairs, and disposition decisions, all which further add complexity to managing service parts.